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Wireless firms place hopes on multimedia

Expect to hear lots of optimistic talk about consumers' desire to download audio and video to their phones at this year's CTIA wireless show.
/ Source: Forbes

What do Busta Rhymes and Carmen Electra have to do with mobile phones? As much as possible — at least that's what the wireless industry desperately hopes.

After years of rapid growth, mobile-phone subscription revenues are flattening out. The industry is betting that multimedia and entertainment offerings — like the ability to download a Busta Rhymes couplet or a Carmen Electra snapshot — will help perk them up again.

That's why the rapper and the actress are heading to the annual Computer Technology Industry of America wireless industry show in Las Vegas this week, where they'll appear at a party sponsored by mobile content company Motricity and Viacom's Black Entertainment Television. Some 35,000 wireless workers will join them, and while there will be some talk of new gizmos and gadgets, most of what they'll see and hear about will be an explosion of things customers can do with their phones — for a fee.

"This year, CTIA is less about devices and more about services," says In-Stat analyst Allen Nogee.

Expect to hear lots of optimistic talk about consumers' desire to download audio and video to their phones. Industry observers, for instance, expect Walt Disney Co. to use the show to roll out its Disney Mobile service, a family-focused, content-rich virtual network that will run on Sprint's airwaves. The Disney service will follow other specialized networks aimed at niche audiences, like Disney's ESPN offering for sports nuts and Amp'd, which is aimed at extreme-sport-loving, viral-video-consuming young men and owned in part by Viacom's MTV and Vivendi Universal's Universal Music Group.

Also big on the pre-show buzz circuit: Location-based services, which are supposed to let a cell phone or other mobile device behave like a GPS receiver and let its users get information based on their surroundings. Meanwhile, a company called Obopay will be rolling out a service that will let users turn their phones into debit cards, giving them a way exchange, spend and retrieve funds over the air.

U.S. consumers have shown some interest in this stuff. Last year, they spent $500 million on ring tones, according to BMI, which acts as a rights clearinghouse for composers and songwriters. But they will need to spend much more to justify the huge costs carriers have sunk in updating their networks to carry lots of data very quickly. Last year the four major carriers spent $24 billion on capital expenditures, much of which went into overhauling their networks. But the average customer spends about 90% of their phone bill on basic, vanilla voice services.

"The carriers are just shooting in the dark," Nogee says. "They're not really sure which services will take off, so they'll try a little bit of everything."

Some of the fanciest stuff getting shown off at the show — next-generation digital video broadcasting technology from Qualcomm, WiMax voice calls from Samsung and direct cellular-to-Wi-Fi call transfers from Nokia — won't hit the market for years, if ever.

So-called "next generation" technologies are dependent on the carriers spending billions more to upgrade their networks yet again. Sprint executives, for example, plan to decide midyear which technology they'll support in 2009, but they will be wary of building services that won't draw demand.

Notably absent from this year's show will be latest and greatest iterations of new phones and devices. In the weeks leading up to the show there have been virtually no hints from handset makers or carriers about impending launches of highly anticipated devices, such as the rumored Treo 700p by Palm, Motorola's oft-delayed "BlackBerry killer" Q, or the Danger Sidekick III.